Saturday, 23 January 2010

MUMBAI - - India's federal electricity regulator announced a policy for regulating tradable energy instruments in the country, a step that will help open up its multibillion-dollar carbon markets as it attempts to balance a rapidly expanding economy with low-carbon growth. The instruments--called renewable energy certificates--will help boost power generation from water, wind, solar and other such clean energy sources in the country. The policy will create a national-level market for buying and selling such certificates, the Central Electricity Regulatory Commission said in a statement late Monday.

A utility or power producer that exceeds its renewable energy targets will be able to sell surplus certificates to utilities that fail to meet their goals. The targets are to be fixed by state-level regulators. Under the policy, a federal-level agency will be created for issuing certificates to renewable energy generators, it said. The value of a certificate will be equivalent to one MW of electricity injected into the grid from renewable sources. These certificates can be traded only in the power exchanges approved by the regulator and within a price range determined by it from time to time, the commission said. "Apart from carbon credits, which are subject to a lot of international protocols and timelines, this [policy] will provide internal support for renewable energy projects within the country," said Vinod Kala, managing director of Emergent Ventures India, an environment consulting company.

India, which currently has an installed generation capacity of about 156 GWs, plans to add about 13 GWs of capacity annually over the next few years to meet the demands of its growing economy. The power sector is the largest contributor to carbon emissions in India, the fourth-largest emitter of greenhouse gases in the world, as a majority of the electricity is generated from fossil fuels such as coal. The country's Environment and Power ministries have a roadmap for increasing the proportion of power from renewable sources in an effort to work toward low-carbon growth. "However, renewable energy sources are not evenly spread across different parts of the country," CERC said.

While a higher renewable purchase obligation can be introduced in some states, it isn't possible in states with lesser potential for renewable sources. renewable energy certificates are expected to address this mismatch between the availability of renewable sources and the requirement of the utilities to meet their renewable targets, CERC said. However, Mr. Kala at Emergent Ventures India said certain pending issues must be addressed--including clarity on what kind of penalties will be implemented if distribution companies don't meet their renewable energy targets--in order for the overall policy to be effective.